14-1. What are financial markets? What function do they perform? How would an economy be worse off without them? A financial market is a mechanism that allows people to buy and sell ( trade ) financial securities (such as stocks and bonds), commodities (such as precious metals or agricultural goods), and other fungible items of value at low transaction costs and at prices that reflect the efficient-market hypothesis . Financial markets help regulate and stimulate the economy on both the public and private sector. We would be worse off without them because there would be less stringent governmental regulation and multiple ethical issues would arise. Such as unfair lending practices, monopolies. ect. 14-2. Define in a technical sense what we mean by financial intermediary . Give an example of your definition. An institution that acts as the middleman between investors and firms raising funds. Often referred to as financial institutions. This can include chartered banks, insurance companies , investment dealers, mutual funds, and pension funds.

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